Lichtenstein Bank Secrecy Scandal

Introduction – During Feb. 2008 the German Intelligence Service paid an ex-employee of a Lichtenstein Bank for a CD containing all the account holder information of foreigners having foundation accounts in a Lichtenstein bank. The German government paid this individual either $6,000,000 or $7,300,000 depending on which account one wishes to believe. They did this thinking they would recover hundreds of millions in taxes. The Germans were alleging that there were Germans using Lichtenstein Foundations and banks to evade taxes that Germany imposes on its citizens. The German taxes can exceed 50% and there is a 25% capital gains tax. Thus the Germans motivation. The German authorities had in their possession account holder information on Americans, French, Spanish, Australians, Canadians, New Zealanders, Italians, Finnish, and Swedish citizens who were all turned over to the respective governments for free but some allege monies were paid for the information by the foreign governments.

Liechtenstein LGT Group, which was the bank whose data was compromised, says it assumes the data was misappropriated and eventually sold unlawfully by a Mr. Heinrich Kieber. Mr. Kieber is a Liechtenstein citizen who was convicted by a Lichtenstein criminal court of stealing electronic account holder information from LGT Treuhand, which is a Division of LGT Group, which is the bank. The Lichtenstein’s ruling family, wholly owns the LGT GROUP BANK. The LGT Group has denied breaking any laws anywhere. They made a statement referencing a person hiding money in a mattress, asking if that should that be grounds for making mattress manufacturing illegal. The Lichtenstein ruling family has rebuked the German Government for this deed openly. They say they are a peaceful country of 35,000 while Germany is over 80,000,000 people. They further went on to say that Germany would not solve its tax problem by villanizing Lichtenstein. The Germans have threatened to impose a tax on all monies going to Lichtenstein which is sort of an economic boycott that could violate international law which it appears the acquisition of the CD also violated. Lichtenstein was quick to retort that such a boycott would be meaningless since the money could easily be rerouted through other countries.

LGT Group then went on to make a statement that the stolen account holder data that they consider illegally disclosed to the German authorities, is only the same data that was stolen by Mr. Kieber back in 2002, the crime for which he was convicted in Lichtenstein. It is assumed the stealing of this data violates the bank secrecy laws of Lichtenstein amongst other laws. It is another safe assumption to assume that if Lichtenstein tries to prosecute the Germans for what some may consider to be an illegal way of obtaining this data that the Germans and some other countries may return the favor with some sort of charges against the Lichtenstein Bank executives and owners thus creating a real international scandal. It is most unlikely that anything will be filed by any country against the other country or their key people. It is also being reported that authorities as a result of this incident were searching some bank offices in Switzerland. Nothing other than searches was reported at this time.

Discussion – First off we wish to make everyone aware that we have advocated the entire continent of Europe as no longer suitable for any privacy in banking, stock brokerage, foundations or corporate matters. There are numerous tax treaties and information sharing agreements amongst the countries and they do not seem to value privacy any more. Lichtenstein has in the past made certain concessions that violated privacy and were not considered a valid jurisdiction by us for some time. Many years ago Lichtenstein was a valid jurisdiction.

This is a fairly unusual and unexpected incident that happened between Germany and Lichtenstein. It can certainly be argued that the obtaining of the data was not lawfully correct since the thief illegally stole the data thus he was not a lawful possessor of the data. This means he had no legal right to transfer title of the data. The terms commonly applied to this sort of action are receipt of stolen property. If you go out and buy stolen data from a bank that has their client data you might be amazed at the list of charges which would probably include: money laundering, conspiracy to commit many crimes, identity theft, receipt of stolen property, computer crimes of various types like hacking, along with other charges.

The people buying the data (German Government) it can reasonably assumed were knowledgeable of law in general as well as international law and made an unlawful acquisition of the data. There has been no statement by the Germans as to why they think the acquisition of the data was lawful. There may be some Germans who take the matter to court in their country and the Hague International Court and fight on this count but it probably will not happen.

One possibility is the people who had their data stolen can sue the bank. They can argue the bank should have notified them about the security breech whenever it was discovered. They can also claim negligence on the part of the bank for not providing adequate checks and balances as to who can download such data like requiring passwords from two or more key people to affect such a download. Probably those exposed will settle and go about their business. Some will probably expatriate to tax havens. It is obvious that there are people who disagree with the tax practices of their countries and may adjust their living arrangements to suit accordingly and that is a choice they can make.

Of course the next question would be can this happen in Panama? It is our opinion that something like this is extremely unlikely to happen. Remember that Germany was a neighboring country to Lichtenstein. Germany is a big EU country and Lichtenstein is not so big and Germany is essentially pushing them around without following any proper protocols. Distributing the data to the other countries was a ploy to rub a sense of legitimacy to the deed and get the other countries involved thus demonizing Lichtenstein who broke no laws while the Germans were the lawbreakers. Of course the high tax countries were sympathetic to the Germans and are jumping in with their own respective witch-hunts for tax evaders. Germany has the clout over its neighbor. Germany was hot about it because it was apparently easy for the Germans to just cross the border and open up these accounts. It appears Germany was lets say taking it personally since it was their neighbor doing it.

Let’s look at Panama in light of this criminal act. Could this or would this be likely to happen in Panama. NO!!! Why? Read on.

Panama has about 17% of its workforce employed by the banks. Figure another 10% of the work force is in related industries – law firms, stockbrokers, and people providing services to the banks like IT, security, janitorial, communications etc. Panama has an 8.5% unemployment level now. If something like this happened in Panama and the government stood still for it the banks would be gone (most of the 150 and many of these 150 have 30 or more branch offices around Panama) and the country would have a very unacceptable level of unemployment in a few months, which could deal Panama a devastating blow that it may not recover from at all.

Panama has teeth and can retaliate. If a nation played illegal games with Panama, Panama could block their ships/goods from crossing the Panama Canal. Ouch that would hurt. It is not nice to play games with the nation that controls the Panama Canal. Panama also holds a seat on the UN Security Council. Ouch more doom and gloom on the way for breaking International Law. Can someone say Hague Court? So rest assured this is not going to happen to a nation like Panama, which is a far cry from Lichtenstein with its 35,000 population.

Rest assured bank security measures have been in place for years to guard against anything like this. No one person at a Panama Bank can go and do a general download of all account holders’ records. My gosh never happen. Such a download would take swipe cards from at least two key executives (think executive vice-president or higher) and their respective passwords. This would also generate a visible and audible alarm at the IT security station who would be on the phone verifying what the heck is going on and probably notifying the president and/or security director. This would be a major event in the IT department, not a casual everyday thing.

The banks are civilly and could even be criminally liable for such security breeches and the compromised clients would be able to sue the banks for damages, which could be treble damages for negligence, and the people who actually did the crime as well could be sued civilly. Warrants would be put out and the people brought to justice as in go to jail. Panama is a major player in international affairs controlling the Panama Canal and holding a seat on the UN Security Council. Panama is more than just a little country land locked in Europe, not in the EU controlled by a royal family, sort of a left over from the past. Countries are not going to be flippant about violating the laws of the Republica de Panama since there would for sure be a price to pay for such actions and that price might be painful as in your country cannot use the Panama Canal anymore and no shipments can go through destined for you and they do read shipping manifests of ships passing through.

Other Strong Banking Privacy Solutions – The real answers for those who are not trusting of the banks and the bank secrecy laws are below:

Trust Agreement Banking – Details on Trust Agreement Banking can be found here in detail. Essentially there is a trust agreement between you and the Guatemala Law Firm. The law firm forms a Guatemala Corporation, which has a Guatemala Bank Account where the law firm is the signatory/beneficial owner. The bank has no idea who you are never ever seeing any id from you. If anyone at the bank compromised the account holders, so what all that comes up is the name of an anonymous Guatemala Corporation and the data on the Guatemala Law Firm, never you.

Additionally we can have the bank records sealed under a judicial seal in a Guatemala Court. This removes access to the bank records from the general employees of the bank and narrows the access down to just the key executives of the bank even though your name is not ever anywhere in the bank records your transactions are there and you may want to protect these transaction records.

To further privatize your financial matter all wires can be directly sent to the Guatemala Law Firm Attorney Client Trust Account at the same bank where your corporation banks (a $75 Billion Dollar Bank very recently rated stable by Standard and Poors). Then after receipt the law firm transfers the funds into your corporate account using the banks manager to effect the transaction thus there are no external wires or trails outside of the bank and everything inside the bank is covered by bank secrecy, the judicial seal and of course attorney client privilege which is very strong in Guatemala.

Guatemala is a privacy jurisdiction with serious bank secrecy and the penalties for violating bank secrecy are severe involving prison sentences and financial penalties. They do not share information except in major crimes like terrorism, murder, blackmail, kidnapping child pornography or abuse, or slavery. They have no tax treaties of any sort. There are no fraudulent conveyance statues in Guatemala. The bank account has online banking showing history, balance and allows for the launching of international wire transfers. The bank account can have an atm card and a secured visa card as well.

The Guatemala Law Firm takes great pains to protect its clients to the point of serious background investigations and regular polygraph exams for the employees including lawyers. Guatemala law would ensure a long-term stay in the gray bar hotel for any employee or lawyer who divulged client information. There are also numerous internal security checks and balances to prevent any such data access by any but a handful of trusted employees and no one person has such access without another persons passwords. Guatemala attorney client privilege is so strong it would be close to impossible to get a court order breaking it and such a thing would be reserved for major criminality like terrorism. Guatemala does not treat money laundering as strongly as other countries view it. Conspiracy laws are also very much weakened in Guatemala. Guatemala is a very free and privacy oriented country.

New Identity Banking – If you had a citizenship with ID card, Drivers License and Passport from a country that does not have any taxes one could use this ID to open up bank accounts in countries around the world. If there were a security violation you would not come up as a person of interest to any government since your ID traces back to a country with no taxes to collect from you. It is possible to have such a new citizenship, ID, Driver License and Passport all legally obtained. Guatemala has nice programs for this. One could also petition the court in closed chambers to do a lawful name change and have the new ID in the new name with the records for the name change sealed under judicial seal. Inquire.

Below you will find some links to the story.

http://www.upi.com/

http://marketplace.publicradio.org/display/web/2008/02/25/liechtenstein

http://afp.google.com/article/ALeqM5hg_bq5f_U2kxaGCCeCGrx8JuQzTQ

http://www.int.iol.co.za/

http://euobserver.com/9/25734